JANUARY 2019

Chief Investment Officer Speaks to Athena Capital's Doug Cohen on the Future of the Current Economic Expansion

In a January 2019 article titled, “Why a 2015-2016 Mini-Recession May Be a Boon to Us Today,” reporter Larry Light argues that the often-overlooked downturn may power the current economic expansion longer.

While many market experts are forecasting an end to the nine year-plus economic expansion, some believe the expansion hasn’t been that long because of a mini-recession experienced in 2015-2016. As a result, the bounce-back may drive the current expansion further than pundits are predicting.

According to the article, “The 2015-16 span featured two stock market corrections (drops of 10% or more). The S&P 500 lost 12.4% and later 13.3%.”

Doug Cohen, Athena Capital’s managing director of portfolio management, notes that whether the current expansion began in 2009 or 2016, it's not a classic rebound. “Several major forces are at work that warped how a recovery normally works: the Federal Reserve’s massive buying of bonds (now ended) and its near-zero interest rates (ditto), and the Trump Administration’s tax cuts and regulatory rollbacks. ‘Those made for big distortions,’ said Mr. Cohen, in the normal path of economic growth.”

Additionally, the 2015-16 mini-recession doesn’t meet the standard definition of a recession, which involves two consecutive quarters of economic contraction. There was also not a rise in joblessness; however, there was an earnings recession.

Yet the question remains, how long with the current ride last? “From June 2009 to December 2014, there was a 66-month expansion, which is close to the 58-month average. Dating the recovery from the mini-recession from October 2016 to the present day makes for a 27-month expansion—giving rise to the suggestion that it has more road to run."

The full article can be read here.

Doug Cohen is a senior member of the Portfolio Management team and is responsible for delivering investment advisory services including asset allocation, portfolio construction, and other portfolio management-related services. In addition, Doug oversees the firm’s New York office.